Overview
- Bank of America told clients on Sunday that it estimates Alphabet’s roughly 14% stake in Anthropic could generate about $80 billion in unrealized gains that flow through Q2 operating income and would materially lift headline EPS.
- This accounting effect is separate from core operations because mark-to-market gains on equity stakes are recorded in operating income and can make quarterly profit swings look larger than cash business trends.
- Alphabet’s underlying businesses remain strong: Google Search grew about 19% in Q1 and Google Cloud grew about 63% with a backlog near $460–$462 billion, and analysts expect Cloud growth to stay a major driver of revenue and margin expansion.
- Analysts are diverging on Q2 models because most have not fully baked the Anthropic revaluation; Bank of America raised its Q2 EPS to $8.38 versus the Street’s roughly $2.90 and kept a $430 price target while flagging capital spending and competitive risks.
- Investors will watch Alphabet’s July 22 earnings for management guidance on capital expenditure plans, Cloud margin trajectory, and how the company plans to monetize AI infrastructure, with Bank of America modeling a roughly 5% lift to 2026 capex to about $190–$200 billion.